Energy & Commodities, No. 2 - February 9, 2012: Brighter economic signs lift the commodity market

1. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department 2
by Jörgen Kennemar No 2 • 2012 02 09
Brighter economic signs lift the commodity market
Stabilization of the global financial markets and an increased risk appetite
among financial investors pushed commodity prices broadly higher in
January. Swedbank’s Total Commodity Price Index rose by 2.5% compared
with December, reaching its highest level since July of last year. The price
index excluding energy commodities, which have fallen since last summer,
rebounded in January due to higher metal and food prices.
The upswing in the commodity markets has come at the same time that
Chinese metal imports rose significantly at the end of last year. Industrial
metals reported for the biggest price gains in January, with nickel and copper
leading the way. Falling global inventories, especially of copper, create the
potential for further price increases going forward. Pulp prices continue to fall,
however. In January they dropped for the sixth consecutive month, hitting a
two-year low. Further production cutbacks are expected in 2012.
There are no obvious signs that oil prices will decline significantly in the short
term. Since October 2010 oil has averaged USD 110 a barrel. The risk
premium on Brent crude is not likely to change considering the geopolitical
uncertainty in the Middle East and risk of supply disruptions. At the same
time oil consumption in emerging economies continues to grow, which will
increase the need for higher production while also underscoring the
importance of efficiency improvements.
Energiråvaror Swedbank’s Total Commodity Price Index, USD
250
Total index Food
Råvaruprisindex totalt
225 Total excl energy
commodities
200
sive energiråvaror
175
Index
150
125
100 Metals
75
05 06 07 08 09Metaller 10 11
Source: Swedbank
Economic Research Department. Swedbank. SE-105 34 Stockholm. Phone 46-8-5859 1000.
E-mail: ek.sekr@swedbank.se www.swedbank.se
Legally responsible publisher: Cecilia Hermansson. 46-8-5859 7720.
Magnus Alvesson. 46-8-5859 334. Jörgen Kennemar. 46-8-5859 7730.

2. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continue
No 2 • 2012 02 09
U.S
The downward trend in commodity prices since the its broad application in industry and construction,
second half of 2011 has leveled off this year, which rose by an average of 6% and has again passed
partly covaries with the improvement in global USD 8 000 a ton. Aluminum, which is used to
industrial activity. The Global Purchasing Managers manufacture aircraft and machinery, among other
Index (PMI) rose in January and is in the growth things, saw less of a price decline last fall compared
zone for the second month in a row. Better growth with other base metals. In January aluminum rose
numbers from the US are also pushing commodity by 5.7% after having steadily fallen during the fall.
prices higher. At the same time investor interest in, Zinc and lead have also risen in price, but at a more
and risk appetite for, commodities has returned modest pace. Iron ore and scrap rose a modest
partly because central banks, especially the 1.8% compared with January 2011.
European Central Bank (ECB), have taken
aggressive monetary action to boost liquidity in the Price trend for industrial metals, January 2011=100
115
international financial markets after fiscal policies
EMU were tightened. This created greater confidence in 110
the financial markets and led to lower TED spreads 105
in Europe. The stabilization of the financial markets
rests on shaky ground, however, and could change 100
quickly, especially if the sovereign debt crisis in the
Index, Jan 2011=100
95
euro zone worsens.
Sweden 90
Interbanks interest rates minus government treasury, TED 85
spreads
80
1,50
75
70
1,25
65
EMU jan feb mar apr maj jun jul aug sep okt nov dec jan
11 12
1,00 Copper Lead Nickel Zinc Aluminium
Source: Swedbank
Sweden
0,75 The rebound in metal prices in the last month has
UK
happened at the same time that Chinese demand
0,50
has risen, as evident by December import data.
Less concern about a hard landing for the Chinese
economy and indications of a growing Chinese
0,25 USA inventory build-up are driving metal prices broadly
Japan
higher. Inventory changes will mean price volatility,
0,00 however, unless underlying demand strengthens.
jan apr jul okt jan apr jul okt jan apr jul okt jan
09 10 11 12
There have also been signs that the Chinese will
Source: Reuters EcoWin
loosen their monetary policy, which is partly
supported by a decline in inflation to a more
Swedbank’s Total Commodity Price Index rose comfortable 4.1% in December. Temporarily lower
by 2.5% in January in USD compared with metal extraction has tightened supply conditions
December, reaching its highest level since July of during the fall and winter, especially for copper.
last year. Measured in euro, the increase was 4.7%. Production by the largest mining companies such
Excluding energy commodities, the index rose by as BHP Billiton, Xstrata, Anglo American and Rio
2.8% in USD after having fallen for eight Tinto fell by 273 000 tons or 8.2% in 2011. This has
consecutive months by a total of 20%. Industrial led to rapidly shrinking copper inventories, which at
metals saw the fastest price gain in January, the time of writing are at their lowest levels in over
climbing as much as 6.1%, the largest monthly two years. Metal prices in coming quarters will
change since August 2010. Nickel rose to nearly depend in large part on how much emerging
USD 19 800 a ton in January, up almost 9% in one economies can keep growing when several OECD
month. This is a significant increase compared with countries are in recession. This also applies to the
last year, when nickel had the weakest price trend global financial markets. Additional liquidity-
of any industrial metal. The price of copper, which is boosting measures by central banks raise the
considered a reliable economic indicator because of likelihood of a further increase in metal prices,

3. Energy & Commodity
Monthly newsletter from Swedbank’s Economic Research Department, continue
No 2 • 2012 02 09
despite that global growth prospects are relatively projected to rise by 3.2% in emerging economies,
modest. while continuing to fall, by 0.3%, in mature industrial
countries. Although China is the world's second
High oil prices are here to stay largest oil consumer, per capita it is significantly
Despite that global oil consumption fell in the last below the OECD average, a gap that will gradually
quarter of 2011, prices have been stuck at a high shrink. Higher oil prices also tend to drive up the
level. Brent crude was an average of 2.4% higher in price of coal. In January coal rose by 3.4% in USD
January, at USD 110 a barrel, which could hurt the from the previous month. This is the first time in
already shaky global economy and thus demand for three months that the price of coal has risen.
oil products. The cold weather in Europe
contributed to a widening price difference between A cold winter is cutting into food supplies
European Brent crude and US crude. Global food prices have fluctuated greatly in recent
years. Increased speculation, production
Brent crude price in USD disruptions owing to unfavorable weather conditions
150
and growing competition between food and energy
140 production are affecting the balance between
130 supply and demand. At the same time the world's
120 population and purchasing power are growing, so
110
demand is trending higher, especially in emerging
economies.
100
USD/fat
90 Grain prices, index
80
500
70
60 450
50 Wheat
400
40
350
30
05 06 07 08 09 10 11 12
300 Cereals
Källa: Swedbank, Reuters EcoWin
250
The rise in oil prices has also been driven by
200
uncertainty about supplies and geopolitical
developments in the Middle East. The EU’s oil 150
embargo on Iran, which will have its full effect this
Corn
summer, and the Iranian threat to block or limit oil 100
shipments through the Strait of Hormuz have raised 50
oil’s risk premium. The embargo, which represents 05 06 07 08 09 10 11 12
600 000 fat barrels a day, is not expected to have a Source: Reuters EcoWin
major impact on supplies, since Saudi Arabia has Increased global food production in 2011 and rising
promised to raise its production. There could be a inventories contributed to a broad decline in prices
bigger shortage of petroleum products, however, in the second half-year at the same time that
especially in Italy and Spain, where refineries investors were seeking out safe harbors in the wake
mainly process lighter, low-sulfur Iranian oil. Iran is of the fiscal crisis. After peaking in February 2011,
the fifth largest oil producer at 3.6 million barrels a Swedbank’s Commodity Price Index fell by nearly
day, most of which is exported to China, India and 20% in USD through last December. In January,
Japan – economies with growing demand. In however, prices rose by an average of 2.3% in USD
Japan, this is mainly due to the tsunami disaster after having fallen for four consecutive months. The
and shutdown of a number of nuclear power plants. unusually cold weather in Russia and Ukraine and
None of these countries is planning to cut back on speculation about Russian export restrictions on
their imports from Iran, which should also reduce grain have driven prices higher. An extended cold
the risk of increased imbalances in the global oil snap could also have a negative effect on
market. At the same time there is a clear shift in production over the course of 2012.
global oil consumption, where emerging economies
led by Asia are taking a growing slice. This trend is Prices of forest commodities continued to fall during
expected to continue. This year consumption is the first month of the year. Pulp prices fell in USD
3 (6)

4. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department, continue
No 2 • 2012 02 09
by 1.7% between December and January, which interest. Silver has risen in USD by slightly over
was a smaller decline than in recent months. Weak 20% since the beginning of the year, against 13%
global demand and overcapacity are contributing to for gold. This is also a sign of an increased risk
the downward trend, because of which pulp has appetite in the financial markets. In addition to
fallen by 18% since peaking in July 2011 at just greater speculation, the price rise is being driven by
over USD 1 000 a ton. This is also a signal of higher industrial consumption of silver. The fiscal
further production cutbacks going forward. crisis in the EMU countries and liquidity support
from central banks suggest further price increases
Price trend for various agricultural products, USD for precious metals.
1200 225
Gold and silver, index
1100 200
1000
Index, 2000=100
1000 175
900
900 150 800
USD/Ton (metric)
USc/Pound
800 125 700
700 100 600
Index
500
600 75
400
500 50
300
400 25
00 01 02 03 04 05 06 07 08 09 10 11 200
Pulp Cotton
Source: Reuters EcoWin 100
jan maj sep jan maj sep jan maj sep jan maj sep jan
08 09 10 11 12
Increased liquidity lifts precious metals Gold Silver
Source: Reuters EcoWin
The decline in the prices of gold and silver last fall
has been followed this year by renewed investor Jörgen Kennemar

5. Energy & Commodities
Monthly newsletter from Swedbank’s Economic Research Department 2
by Jörgen Kennemar No 2 • 2012 02 09
Swedbank Commodity Index - US$ - Swedbank Commodity Index - SKr -
Basis 2000 = 1oo 10-02-12 Basis 2000 = 1oo 10-02-12
11.2011 12.2011 1.2012 11.2011 12.2011 1.2012
T otal index 365,0 359,7 368,7 T otal index 267,4 267,8 274,5
Per cent change month ago 2,5 -1,4 2,5 Per cent change month ago 3,9 0,2 2,5
Per cent change year ago 22,8 14,5 12,7 Per cent change year ago 21,4 14,6 15,8
T otal index exclusive energy 269,5 264,1 271,5 T otal index exclusive energy 197,4 196,6 202,2
Per cent change month ago -4,6 -2,0 2,8 Per cent change month ago -3,3 -0,4 2,8
Per cent change year ago -5,0 -9,8 -12,0 Per cent change year ago -6,2 -9,6 -9,7
Food, tropical beverages 268,6 258,7 264,8 Food, tropical beverages 196,8 192,6 197,2
Per cent change month ago -2,3 -3,7 2,4 Per cent change month ago -1,0 -2,1 2,4
Per cent change year ago -0,6 -9,6 -12,5 Per cent change year ago -1,7 -9,5 -10,1
Cereals 277,2 269,0 275,5 Cereals 203,1 200,3 205,1
Per cent change month ago -1,6 -3,0 2,4 Per cent change month ago -0,3 -1,4 2,4
Per cent change year ago 7,8 -3,5 -6,5 Per cent change year ago 6,6 -3,4 -4,0
T ropical beverages and tobacco 286,5 274,0 277,0 T ropical beverages and tobacco 209,9 204,0 206,2
Per cent change month ago -2,5 -4,4 1,1 Per cent change month ago -1,2 -2,8 1,1
Per cent change year ago 0,5 -9,1 -12,6 Per cent change year ago -0,7 -9,0 -10,3
Coffee 193,7 189,1 188,7 Coffee 141,9 140,8 140,5
Per cent change month ago -0,2 -2,4 -0,2 Per cent change month ago 1,1 -0,8 -0,2
Per cent change year ago 11,4 2,9 -4,4 Per cent change year ago 10,1 3,0 -1,8
Oilseeds and oil 224,2 218,8 231,3 Oilseeds and oil 164,3 162,9 172,2
Per cent change month ago -2,4 -2,4 5,7 Per cent change month ago -1,1 -0,8 5,7
Per cent change year ago -8,9 -15,2 -16,3 Per cent change year ago -10,0 -15,1 -14,1
Industrial raw materials 269,8 265,7 273,5 Industrial raw materials 197,6 197,8 203,6
Per cent change month ago -5,2 -1,5 2,9 Per cent change month ago -3,9 0,1 2,9
Per cent change year ago -6,3 -9,8 -11,9 Per cent change year ago -7,4 -9,7 -9,5
Agricultural raw materials 173,7 167,1 166,8 Agricultural raw materials 127,3 124,4 124,2
Per cent change month ago -7,1 -3,8 -0,2 Per cent change month ago -5,8 -2,2 -0,2
Per cent change year ago -8,9 -13,5 -16,9 Per cent change year ago -10,0 -13,4 -14,7
Cotton 96,2 89,1 96,3 Cotton 70,5 66,3 71,7
Per cent change month ago -4,9 -7,4 8,1 Per cent change month ago -3,7 -5,9 8,1
Per cent change year ago -27,1 -36,7 -36,5 Per cent change year ago -28,0 -36,6 -34,8
Softwood 138,3 132,3 129,7 Softwood 101,3 98,5 96,6
Per cent change month ago -4,4 -4,3 -2,0 Per cent change month ago -3,1 -2,8 -2,0
Per cent change year ago -7,4 -8,5 -10,1 Per cent change year ago -8,5 -8,4 -7,6
W oodpulp 887,3 846,0 831,6 W oodpulp 650,0 629,9 619,2
Per cent change month ago -4,6 -4,7 -1,7 Per cent change month ago -3,3 -3,1 -1,7
Per cent change year ago -7,3 -10,9 -12,4 Per cent change year ago -8,4 -10,8 -10,0
N on-ferrous metals 232,3 229,6 243,6 Non-ferrous metals 170,2 171,0 181,4
Per cent change month ago -1,9 -1,2 6,1 Per cent change month ago -0,5 0,5 6,1
Per cent change year ago -13,0 -16,6 -13,2
Per cent change year ago -12,0 -16,7 -15,5
Copper 5532,2 5635,0 5972,0
Copper 7551,4 7568,2 8020,8
Per cent change month ago 3,8 1,9 6,0
Per cent change month ago 2,4 0,2 6,0
Per cent change year ago -11,9 -17,0 -13,9
Per cent change year ago -10,8 -17,1 -16,1
Aluminium 1518,8 1504,0 1590,3
Aluminium 2073,2 2020,0 2135,9
Per cent change month ago -3,4 -1,0 5,7
Per cent change month ago -4,7 -2,6 5,7
Per cent change year ago -12,2 -13,8 -10,1
Per cent change year ago -11,1 -13,9 -12,5
Lead 1451,7 1501,8 1555,1
Lead 1981,6 2017,0 2088,6
Per cent change month ago 3,2 3,4 3,5
Per cent change month ago 1,8 1,8 3,5
Per cent change year ago -17,6 -16,0 -17,5
Per cent change year ago -16,6 -16,1 -19,7
Z inc 1403,5 1424,0 1469,3
Z inc 1915,7 1912,5 1973,4
Per cent change month ago 4,4 1,5 3,2
Per cent change month ago 3,0 -0,2 3,2
Per cent change year ago -17,4 -15,7 -14,6
Per cent change year ago -16,4 -15,8 -16,9
Nickel 13098,6 13530,0 14703,8
N ickel 17879,4 18171,7 19748,2
Per cent change month ago -4,2 3,3 8,7
Per cent change month ago -5,5 1,6 8,7
Per cent change year ago -22,9 -24,3 -20,8
Per cent change year ago -21,9 -24,5 -22,9
Iron ore, steel scrap 454,9 461,0 469,4
Iron ore, steel scrap 620,9 619,2 630,4
Per cent change month ago -6,0 1,4 1,8
Per cent change month ago -7,2 -0,3 1,8
Per cent change year ago 1,8 2,2 -0,9
Per cent change year ago 3,0 2,0 -3,5 Energy raw materials 298,4 299,4 306,6
Energy raw materials 407,4 402,1 411,8 Per cent change month ago 6,2 0,3 2,4
Per cent change month ago 4,8 -1,3 2,4 Per cent change year ago 32,8 24,4 26,2
Per cent change year ago 34,4 24,2 22,9 Coking coal 313,8 314,8 326,5
Coking coal 428,4 422,8 438,5 Per cent change month ago -3,3 0,3 3,7
Per cent change month ago -4,6 -1,3 3,7 Per cent change year ago 4,1 -6,9 -8,2
Per cent change year ago 5,3 -7,0 -10,6 Crude oil 297,7 298,7 305,7
Crude oil 406,4 401,2 410,6 Per cent change month ago 6,7 0,3 2,3
Per cent change month ago 5,3 -1,3 2,3 Per cent change year ago 34,6 26,4 28,5
Per cent change year ago 36,2 26,2 25,1
Source : SW ED BAN K and H W W A-Institute for Economic R esearch H amburg c Source : SW EDBANK and HW W A-Institute for Economic Research Hamburg
Swedbank
Swedbank’s monthly Energy & Commodities newsletter is published as s service to our
Economic Research Department customers. We believe that we have used reliable sources and methods in the preparation
of the analyses reported in this publication. However, we cannot guarantee the accuracy or
SE-105 34 Stockholm, Sweden
completeness of the report and cannot be held responsible for any error or omission in the
Phone 46-8-5859 7740
underlying material or its use. Readers are encouraged to base any (investment) decisions
ek.sekr@swedbank.se
on otjer material as well. Neither Swedbank nor its employees may be held responsible for
www.swedbank.se
losses or damages, direct or indirect, owing to any errors or omissions in Swedbanks
Legally responsible publisher monthly Energy & Commodities newsletter.
Cecilia Hermansson, 46-8-5859 7720.
Magnus Alvesson, 46-8-5859 3341
Jörgen Kennemar, 46-8-5859 7730
Economic Research Department. Swedbank. SE-105 34 Stockholm. Phone 46-8-5859 1000.
E-mail: ek.sekr@swedbank.se www.swedbank.se
Legally responsible publisher: Cecilia Hermansson. 46-8-5859 7720.
Magnus Alvesson. 46-8-5859 334. Jörgen Kennemar. 46-8-5859 7730.